A preview of coming attractions

A preview of coming attractions

Just in case anyone wants to know what the short-acting insulin market will look like in a few years after the arrival of a biosimilar look at the results released by Sanofi (NYSE: SNY) this morning. Per their press release;

“In the third quarter, global Diabetes sales decreased 10.0% to €1,552 million, reflecting lower Lantus® sales in the U.S. Third-quarter U.S. Diabetes sales were down 22.4% to €745 million. Year-to-date U.S. Diabetes sales decreased 20.2% to €2,398 million”

“Given increased visibility on sales performance, Sanofi refines its global Diabetes franchise outlook to -6% to -8% CAGR over 2015-2018 at CER.”

Simply put the declines being seen in diabetes sales will go from bad to worse. The fact is 85% of sales are related to two products, Lantus and Toujeo. Lantus alone counts for 72% of sales. These two long-acting insulins are not just facing multiple branded products from Novo Nordisk (NYSE: NVO) but also Basaglar from Lilly (NYSE: LLY).

Now we won’t say again that management should have better prepared for this situation that everyone knew was coming, that train left the station long ago. But what we will say is we sure hope the folks at Lilly and Novo are paying attention as their core franchises are about to experience this exact same situation with the coming of a biosimilar short-acting insulin. Yes, the insulin market both short and long acting is fully transforming into a commodity market.

The real question is, are Lilly and Novo better prepared than Sanofi was. Based on what we have seen so far there is reason to be optimistic. Lilly has already stated that unlike Sanofi they won’t sue to slow down the arrival of the short-acting biosimilar. They will fight it out in the marketplace. Novo on the flip side is right-sizing their operation while at the same time introducing a new even faster acting insulin. Novo like Lilly knows that payors will demand even larger discounts and/or rebates when the biosimilar gets here.

This dynamic in the insulin market will also impact the growing GLP-1 market, a market now the domain of Novo and Lilly. Here is another example of how Sanofi failed as they have nothing of substance in this category and what they do have is a day late and dollar short. Or put another typical Sanofi.

Lilly and Novo at least have quality offerings in this growing category which will help them offset the loses they will experience in the short-acting insulin category. Sanofi on the flip side put all their eggs in one basket and when there were signs these eggs were beginning to crack they did what they always do. They doubled down on the same losing horse.

So, the question is where do they go from here. Sales of their core products continue to decline. There is nothing in the near-term pipeline that will help. And the only product that seems to stand any chance at all is their biosimilar short-acting, which will if played right will generate nice sales but at lower margins. Yet we suspect that neither Novo or Lilly will allow Sanofi to decimate their short-acting portfolio’s as Lilly did to Sanofi’s and Novo’s long-acting portfolio.

Now we have heard rumors that the company has an interest in the insulin pump market which won’t solve anything. Yet this would be so Sanofi a company that just loves to throw good money into bad businesses. They did it with MannKind (NASDAQ: MNKD) and could well do it again.

Their way cool whiz bang interconnected “smart” insulin pen could help but only if the pen is integrated with a CGM and patient friendly app. As we noted before the company has invested $250 million with Google to create Onduo and Google is partnered with Dexcom (NASDAQ: DXCM) so it would seem to make sense that Google would bring Dexcom into the fold. But as we have seen so often Sanofi is the worst partner possible in diabetes as they just don’t get it.

The reality is this partnership isn’t working out all that well. Sanofi is unhappy with the lack of progress while Google isn’t thrilled with how Sanofi does business. We won’t go as far and say the relationship has turned to oil and water, but the relationship is very strained. There are no doubt changes need to be made but given the nature of the relationship isn’t unlikely they will be made.

We hate to say it but the longer this goes on without major changes the greater the likelihood that this will be just one more failed attempt at changing diabetes management.

This in an ironic way is the Sanofi story in diabetes. A company who at one time seemed to be on the right track and actually was ahead of the curve. But when it’s all said and done they just couldn’t execute. They couldn’t get out of their own way. No one was held accountable, millions were wasted, and it wasn’t until the failure was obvious that the beheadings began.

So, is there hope? We’d like to think so, but history tells us not to get overly excited.